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Price Hysteresis After Antitrust Enforcement: Evidence From Spanish Food Markets

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  • José Manuel Ordóñez-de-Haro
  • José Luis Torres

Abstract

This article provides additional empirical evidence regarding the effects of antitrust enforcement on consumer prices in prosecuted markets. We focus on the effect of the Spanish Competition Authority investigation and prosecution of several Spanish food associations for alleged collective price recommendations against the Spanish Competition Act by analyzing the subsequent price behavior for their respective products. The results show that antitrust enforcement may lead to a reduction in food price volatility and, in some cases, may even cause long periods of price rigidity in the concerned markets. We consider that observed hysteresis in prices may be due to the disruption of the mechanism played by associations in the transmission of information about how to pass on the cost shocks to their customers or, importantly, to the change in pricing behavior by keeping prices above competitive levels, but stable enough to minimize the risk of another antitrust intervention. This strategic conduct would be in line with the findings in the theoretical literature about collusion in the presence of competition authorities.

Suggested Citation

  • José Manuel Ordóñez-de-Haro & José Luis Torres, 2014. "Price Hysteresis After Antitrust Enforcement: Evidence From Spanish Food Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 10(1), pages 217-256.
    • Handle: RePEc:oup:jcomle:v:10:y:2014:i:1:p:217-256.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht029
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    References listed on IDEAS

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    1. Feinberg, Robert M., 1984. "Strategic and deterrent pricing responses to antitrust investigations," International Journal of Industrial Organization, Elsevier, vol. 2(1), pages 75-84, March.
    2. Can Erutku & Vincent A. Hildebrand, 2010. "Conspiracy at the Pump," Journal of Law and Economics, University of Chicago Press, vol. 53(1), pages 223-237, February.
    3. Kai Hüschelrath & Nina Leheyda & Patrick Beschorner, 2010. "Assessing The Effects Of A Road-Surfacing Cartel In Switzerland," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 335-374.
    4. Newmark, Craig M, 1988. "Does Horizontal Price Fixing Raise Price? A Look at the Bakers of Washington Case," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 469-484, October.
    5. Erutku, Can, 2012. "Testing post-cartel pricing during litigation," Economics Letters, Elsevier, vol. 116(3), pages 339-342.
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    Cited by:

    1. Kurdoglu, Berkay & Yucel, Eray, 2022. "A Cointegration-based cartel screen for detecting collusion," MPRA Paper 113888, University Library of Munich, Germany.
    2. Chowdhury, Subhasish M. & Crede, Carsten J., 2020. "Post-cartel tacit collusion: Determinants, consequences, and prevention," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    3. Carsten J. Crede, 2019. "A Structural Break Cartel Screen for Dating and Detecting Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 543-574, May.
    4. Carsten J. Crede, 2015. "A structural break cartel screen for dating and detecting collusion," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2015-11, Centre for Competition Policy, University of East Anglia, Norwich, UK..

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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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